Tobacco farmers collect 6bn/- to form own bank

A farmer harvests tobacco in Urambo District, Tabora Region, where the crop is the area’s money-spinner. (File photo)

Tobacco farmers in Tanzania are set to establish their own bank to begin with a capital of 6bn/- next month. The aim of setting up the bank is, among other things, to enable them secure loans easily.

Currently tobacco farmers only access loans from few commercial banks such as CRDB, National Microfinance Bank (NMB) and Azania Bank which dish out money at very high interest rates thus obstructing smallholder farmers from procuring loans.

Speaking to this paper on the phone yesterday, the chairperson of Tanzania Tobacco Farmers Association, who is also the MP for Mpanda-Rural, Moshi Kakoso, said the society has chosen Tabora municipality to be the headquarters of the bank because a quarter of tobacco farmers are found in the region.

“We expect more smallholder farmers to be cooperative in the founding of the bank because their presence in the setting up of the bank is necessary,” Kakoso said.

According to Kakoso, to get a loan from the bank, every party should have at least 2m/- in deposits, while the existing parties’ starts from the level of smallholder farmers in rural areas to farmers.

However, he added that, the association has decided that it will not sell tobacco in Shillings but in US dollars focusing on more profit to the farmers.

He said the society also wants the government to uphold to its 2009 decision aimed at increasing tobacco production from 58,702 tonnes to 60,000 tonnes.

Kakoso explained that, tobacco farmers, through their cooperatives and primary societies, will be the source to their agricultural inputs using bank credits.

The procured inputs will then be distributed to society members on loan basis. The members will then sell their harvests in cured tobacco through their societies which would maintain accounts with the loaning bank.

Previously, tobacco emerged as one of the main sources of government revenue among the total traditional exports, according to a Bank of Tanzania monthly economic review.

By the same vein, official government figures show that a total of 340bn/- was collected as tax from tobacco in the last five years.

About 52bn/- was collected in 2003/2004, some 59bn/- in 2004/2005, whereas 62bn/-was collected in 2005/2006.

At least 77bn/- was collected in 2006/2007 and 90bn/- was collected in 2007/2008.

Tobacco production rose to 59 million kgs in 2009 up from 22 million kgs in 2000 resulting in local farmers to earn as much as between 300,000/- and 500,000/- per ha in the previous season.

Globally, there is an oversupply situation resulting from increased worldwide production and reduced consumption due to the world economic recession, smoking restrictions/bans, increased taxation on tobacco products and tobacco products regulations.